Parliament TV: 75 Years- Legal guidelines That Formed India- Earnings Tax Act, 1961

Earnings Tax Act 1961:

  • The Earnings Tax Act, 1961 is an Act to levy, administer, accumulate and accumulate revenue tax in India. It got here into pressure from 1 April 1962.
  • The Earnings Tax Act, 1961 is the charging statute of revenue tax in India.
  • The Authorities of India got here up with a draft legislation known as the “Direct Tax Code” to switch the Earnings Tax Act, 1961 and the Wealth Tax Act, 1957.
  • The Earnings Tax Act has offered separate provisions with respect to revenue obtained prematurely in addition to taxation of revenue in respect of which the quantity has not but been obtained.
  • A person additionally has to maintain observe of his TDS deducted whereas computing his closing tax legal responsibility on the finish of the yr.
  • Nevertheless, the invoice was later scrapped on account of repeal of the Wealth Tax Act.

Current Tax Reforms

  • Oblique Tax Reforms: The amalgamation of state and central oblique taxes into the GST abolished the entry tax and central gross sales tax (CST). GST is an oblique tax that has been launched to switch many different oblique taxes like VAT, Service Tax, Buy Tax, Excise Obligation and so on.
  • Company tax price minimize For all current home firms: To spice up progress and funding, the federal government has introduced in a historic tax reform by the Taxation Legal guidelines (Modification) Ordinance 2019, which gives a concessional price of twenty-two% for all current home firms from FY19 Supplies tax regime- 20 if they don’t make the most of any specified exemption or incentive.
  • Incentives for brand spanking new manufacturing home firms: So as to appeal to funding within the manufacturing sector, the Taxation Legal guidelines (Modification) Ordinance 2019 has lowered the tax price for brand spanking new manufacturing home firms to fifteen%, if such firm gives any specified exemption. doesn’t make the most of or encouragement.
  • Discount in MAT price: So as to present aid to firms which have continued to pay exemption/deduction and tax below MAT, the MAT price has additionally been lowered from 18.5% to fifteen%.
  • Exemption from revenue tax to individuals incomes revenue as much as Rs. 5 lakh and enhance in customary deduction: Additional, offering full aid from cost of revenue tax to individuals incomes taxable revenue as much as Rs. 5 lakh, the Finance Act, 2019 exempted a person taxpayer from taxable revenue as much as Rs. 5 lakh by offering 100% tax exemption.

Rationalization and Simplification:

  • The speed construction – the slabs of 10%, 20% and 30% in private revenue tax – has remained largely the identical over the previous 20 years.
  • Additional, there’s a must rationalize exemptions and rethink incentives on financial savings (reminiscent of small financial savings schemes like PPF).
  • Simplifying company tax price construction and phasing out exemptions: The distinction in efficient company tax price throughout sectors is large. For instance in 2014-15, the efficient tax charges for cement producers, consulting companies companies and banking companies companies have been 9%, 16% and 35% respectively.
  • The broader tax base will assist in tackling the issue of potential income loss on account of decrease tax charges and simplified tax construction.
  • Decreasing tax litigation: The tendency of tax authorities to provoke motion with out obligatory justification or evaluation is mirrored by the low success price (~30%) of appeals.
  • Extended tax litigation in India has not solely burdened the Indian judiciary but additionally brought about harm to the exchequer.
  • Guarantee stability between direct and oblique taxes: The contribution of direct taxes has come down from 60% in 2010-11 to 52% in 2017-18. The growing share of oblique taxes within the income is worrying as oblique taxes are regressive which harm the poor folks extra.
  • Readability in cross-border transactions: Until now, the supply rule of taxation for non-residents was linked to bodily presence (everlasting institution), which has led to protracted litigation, base erosion and revenue switch.


  • Taxation isn’t just a way of accelerating the income of the state. It may also be vitally essential for financial and political improvement.
  • The legacy of controversial, adversarial tax points from the previous is being cleaned up.
  • Tax administration being reformed: Now round 95% of filings are digital, with tax refunds now being issued in a document 7-8 days.
  • Nevertheless, success in garnering massive tax revenues has been solely restricted and sporadic and but, India stays a largely tax non-compliant society. For this, additional reforms as per the Direct Taxes Code are the necessity of the hour.

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